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issued: (a) the District is current in all payments hereunder and is not otherwise in default <br /> hereunder or under the terms of the Paying Agent Agreement or any reserve fund agreement with <br /> a bond insurer; and (b) (i) the Recurring Revenues for the previous year minus Operation and <br /> Maintenance Expenses for the previous year equals 100% of Maximum Annual Debt Service on <br /> the Outstanding Obligations, repayment obligations with respect to any reserve fund, Policy <br /> Costs and projected Parity Lien Bonds and (ii) the sum of Recurring Revenues and Capacity Fees <br /> for the previous year minus Operation and Maintenance Expenses for the previous year, plus <br /> amounts in the Rate Stabilization Account equals 125% of Maximum Annual Debt Service on <br /> both the Outstanding Obligations and projected Parity Lien Bonds. The amount of Recurring <br /> Revenues and Capacity Fees taken into account for purpose of the foregoing calculations shall <br /> include any increases in rates, fees, tolls, and charges adopted by the District for the current year. <br /> Further, the foregoing calculations shall be certified by a certified public accountant. <br /> Simultaneously with the issuance of Parity Lien Bonds, there shall be deposited in a reserve fund, <br /> if required by the resolution authorizing the Parity Lien Bonds, such amounts as may be <br /> necessary to meet the applicable reserve fund requirement for such bonds or to purchase a reserve <br /> fund insurance policy in lieu thereof or a combination thereof. For the purpose of the Parity Lien <br /> Bond test variable rate indebtedness shall be deemed to bear interest at a fixed rate equal to the <br /> average variable rate borne over the preceding 24 months by variable rate debt of the District <br /> outstanding, or, if no variable rate debt of the District has been outstanding for 24 months <br /> preceding the date of the calculation, by reference to the Bond Buyer 25 year revenue bond <br /> index, or if such index is not available at the time of the calculation, by reference to an index <br /> commonly in use at the time of debt obligations comparable to the variable rate debt then <br /> proposed to be issued. The District may not issue Parity Lien Bonds if any Event of Default as <br /> defined in the Registration and Paying Agent Agreement (hereinafter referred to as "Event of <br /> Default") (or any event which, once all notice or grace periods have passed, would constitute an <br /> Event of Default) has occurred and is continuing unless such default shall be cured upon such <br /> issuance. If any Policy Costs are past due and owing to any bond insurer, the District may not <br /> issue Parity Lien Bonds without the prior written consent of such bond insurer. The <br /> requirements set forth in this Resolution for issuing Parity Lien Bonds shall also apply to the <br /> issuance by the District of General Obligation Bonds. Nothing herein shall prevent the District <br /> from issuing Subordinate Lien Bonds. Under Sections 12 of the Loan Contracts, Parity Lien <br /> Bonds must be reviewed and approved by the CWCB prior to the issuance of such Parity Lien <br /> Bonds, which approval may not be unreasonably withheld. <br /> Section 12. That the District agrees that it will comply with the Colorado Local <br /> Government Audit Law, being Section 29-1-601, et seq., Colorado Revised Statutes, and the <br /> Local Government Budget Law of Colorado, being Section 29-1-101, et seq., Colorado Revised <br /> Statutes. <br /> Section 13. That the District covenants and agrees that it will make no use of the <br /> proceeds of the Loan Contracts, or any other funds of the District which might cause such <br /> obligations to be arbitrage bonds within the meaning of the Internal Revenue Code of 1986, as <br /> amended (the "Code"), and applicable proposed, temporary and final regulations promulgated <br /> thereunder and under the Internal Revenue Code of 1954, as amended (the "Regulations"). <br /> -9- <br />